Although the proposed rule made significant changes in how CMS calculates ambulatory payment classifications (APC) and how it reimburses hospitals for payable drugs and biologics, the lion’s share of the comments address the effect that assigning patients observation status could have on Medicare benefits.

A patient on observation status in an acute care hospital is classified as an outpatient even though the patient occupies a bed, stays overnight, and receives medical care. The outpatient classification could affect Medicare coverage of any subsequent stay in a skilled nursing facility (SNF) because CMS requires three days of inpatient status before covering an SNF stay.

In requesting comments on observation status CMS indicated that it is considering changing or clarifying its policies on that matter. It is conducting a Medicare Part A-to-Part B rebilling demonstration project.